The announcement comes even as analysts have cautioned that a number of Satyam's customers are looking around for new suppliers. State Farm Insurance Co. of the U.S. terminated its technology outsourcing contract with the company, but some other customers, such as General Electric Co. and Cisco Systems, have said that they will continue to work with Satyam.
Customers will stay with Satyam if they see some efforts to restore stability at the company, because the cost and time involved to move work to another outsourcer is very high, some analysts said.
Satyam's board met Saturday to finalize the process for selling off a controlling stake in the company to a strategic investor. A final announcement of the process will be made after regulatory approvals are obtained, the board said after the meeting.
Satyam founder B. Ramalinga Raju said on Jan. 7 that the company's profits had been over-stated for several years. The government superseded the board of Satyam and appointed a board consisting of its nominees to steer the company through the ensuing financial crisis.
The Indian government's Company Law Board (CLB) on Thursday authorized the new board to increase the share capital of Satyam, and to issue preferential equity to a strategic investor who will bring in management expertise. Selling new equity to an investor will enable the company to raise funds, which it needs to tide over a working capital crisis.
Issuing new capital usually requires shareholder approval under Indian law, which the board wanted to avoid to save time, it said in a submission to the CLB.
The company also announced cost-cutting measures this week, including a freeze on capital expenses, and said two key executives had resigned from the company as part of its "cost-rationalization" effort. The moves are intended to make Satyam attractive to an investor, a source close to the situation said.
The board also accepted on Saturday the resignation of the company's auditors Price Waterhouse, the Indian unit of PriceWaterhouseCoopers.